- Prior month 0.3% revised higher to 0.4%
- Business inventories for June 0.0% vs 0.1% estimate
- Retail inventories ex autos -0.4% vs -0.2% last month.
Sales show a sharp fall in June but still up strong for the year.
- June business sales: $2.111 trillion
- Month-over-month:-1.1% vs. May 2026
- Year-over-year:+10.0% vs. June 2025
- Sales figures are seasonally and trading-day adjusted, but not adjusted for price changes.
The total business inventories/sales ratio based on seasonally adjusted data at the end of June was 1.30 which is higher from the lowest level going back to 2021. The June 2025 ratio was 1.39.
With the inventory-to-sales ratio is at its lowest since 2021, it can create the conditions for an inventory-rebuilding cycle, particularly if sales remain firm.
- Inventories are lean relative to sales. Businesses are carrying less inventory for each dollar of sales, meaning there is less of an inventory cushion.
- Potential production boost: If demand holds up, companies may need to increase orders and production to rebuild inventories. Historically, inventory drawdowns associated with stronger demand can lead to increased output as firms restock.
- Positive for GDP: Inventory investment is part of GDP. A transition from little or no inventory accumulation to meaningful restocking can therefore add to GDP growth, even before inventories become particularly large. The Fed has documented past periods when a turn from inventory liquidation toward restocking provided a meaningful contribution to growth.
- Positive for manufacturing and transportation: A broad rebuild could mean more factory production, supplier orders, freight and warehousing activity.
- But demand is critical. A low ratio by itself doesn’t guarantee a rebuild. If sales weaken, companies may be perfectly comfortable with existing inventories and won’t necessarily increase orders.
- There is also a structural issue: Businesses have become more efficient at running lean inventories through just-in-time systems, so today’s “normal” inventory-to-sales ratio may be lower than historical norms.
For the June numbers, there’s an interesting setup: inventories were essentially flat m/m while sales were +10.0% y/y, and the inventory/sales ratio is 1.30 versus 1.39 a year ago. If sales remain resilient, that increasingly argues for future inventory rebuilding—which could provide an additional tailwind to production and GDP.
The key question over the next few months is whether sales stay strong enough to force businesses to restock.
The Manufacturing and Trade Inventories and Sales estimates are based on data from three surveys: the
Monthly Retail Trade Survey, the Monthly Wholesale Trade Survey, and the Manufacturers’ Shipments,
Inventories, and Orders Survey. Data for the wholesale and manufacturing sectors are unrevised from the
most recent Monthly Wholesale Trade Report and the Full Report on Manufacturers’ Shipments, Inventories
and orders. Data from the Retail sector is revised and presented in more detail from the most recent Advance
Economic Indicators Report
This article was written by Greg Michalowski at investinglive.com.